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Deloitte comments on PCAOB's proposed auditing standard

Published on: Aug 31, 2016

Deloitte & Touche LLP comments on the PCAOB's proposed Auditing Standard The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion (the reproposed standard or AS 3101) and Related Amendments to PCAOB Standards (the proposed amendments), which were issued in May 2016.

An excerpt from the comment letter is shown below:

Overall Comments

As stated in our prior comment letter to the Board, we support the Board’s efforts to increase the informational value, usefulness, and relevance of the auditor’s report. We appreciate the substantive efforts of the PCAOB to address concerns and suggestions raised in previous comment letters related to auditor reporting, which we believe have led to substantial enhancements in the reproposed standard. In addition, we commend the PCAOB’s consideration of similar auditor reporting efforts undertaken by several international and non-U.S. standard setters and regulators while also recognizing that the regulatory environments in other jurisdictions are different from the United States.

We are supportive of the revised requirements the Board has put forward in its reproposed standard.  We believe the revised requirements result in achieving the overall objective of providing meaningful and useful information about the audit to investors and other financial statement users, while alleviating certain concerns of potentially being at odds with the long-standing, historical reporting model of management being responsible for the company’s financial statements and disclosures and the auditor attesting to the information within financial statements.  In particular, we are supportive of the following changes to the auditor’s report:

•  Including a statement that the auditor is required to be independent with respect to the company in accordance with U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission (SEC) and the PCAOB.

•  Including additional language regarding the auditor’s responsibilities with respect to the detection of error or fraud and performing procedures to assess the risks of material misstatement.

•  Clarifying that an audit encompasses the financial statements and the related notes.

Each of the above changes will help to clarify the role and resonsibilities of the auditor.

In addition, we are supportive of the revised requirements with respect to critical audit matters (CAMs) as discussed further below.  Based on our review of the reproposal, we believe that there are certain limited implementation and other issues that should be further considered by the PCAOB as it moves to finalize the reproposal.  We discuss our observations and additional items for consideration below and in Appendix A.

Full text of the comment letter is available below.


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